Colds and flu boost sales at Reckitt Benckiser

RECKITT Benckiser reported a strong start to 2013 as the maker of Strepsil lozenges and pain killer Nurofen benefited from a severe cold and flu season.

The company also said its Dettol disinfectant is growing strongly in emerging markets.

Reckitt, which was founded in Hull and has research and development and healthcare manufacturing operations in the city, has been shifting its focus to the fast-growing health and hygiene sector.

Sign up to our Business newsletter

Sign up to our Business newsletter

Total net revenues in the three months to the end of March were £2.52bn, up seven per cent, or six per cent stripping out its pharmaceuticals unit.

Analysts were expecting revenues of £2.47bn for the quarter.

The group, which also owns brands such as cleaner Harpic and Durex condoms, made big strides in its rapidly-expanding markets of India, Brazil and China, driving underlying revenue growth during the first three months of the year.

Reckitt said it is confident of achieving five to six per cent growth for the year despite “continued challenging market conditions”.

Reckitt has benefited from a spate of flu and colds with successful launches of new products such as Strepsil lozenges for children and Nurofen heat patches.

Other innovations such as Mucinex Fast Max and Sinus Max decongestants drove growth in the US, helping its European and North American division to increase underlying sales by three per cent amid sluggish consumer spending.

Its Latin America and Asia Pacific region was the star performer, with growth of 11 per cent driven by strong sales of Durex in China, plus good performance from Gaviscon heartburn treatment, Vanish stain remover and Air Wick air freshener.

Underlying sales rose by seven per cent in Russia, the Middle East and Africa, boosted by sales of Durex and Strepsils.

Reckitt is battling newly-introduced generic competition in its highly profitable pharmaceuticals business.

Rivals’ generic tablets have so far taken ten per cent market share since their recent launch.

The company said revenue growth at its recently-acquired Schiff business is “well ahead” of the US vitamin market.

Reckitt also makes household cleaning products such as Cillit Bang and Gaviscon indigestion treatment.

It is also targeting emerging markets, and wants them to make up half its sales by 2015, compared with 44 per cent currently. Its pharmaceuticals business makes most of its profit from buprenorphine drugs to wean addicts off heroin.

US regulators gave the go-ahead for two generic versions of Reckitt’s buprenorphine Suboxone drug earlier this year, which had been widely expected after it went off-patent in 2009.

Reckitt said the early impact of the generic tablets on its sales was in line with expectations.

Analyst Graham Jones, at Panmure, said: “Reckitt has made a good start to the first quarter of 2013 with its base business delivering revenue growth of six per cent to £2,316m.

“Growth continues to be driven by continued strength in emerging markets, boosted by a strong cold and flu season in the ENA region.

“As yet there has been a limited impact on Reckitt Benckiser following the launch of generics in March with the division also benefitting from the sell-in of film into the US wholesalers, resulting in revenue growth ahead of our expectations at 20 per cent.”

In February Reckitt beat full year profit forecasts, driven in part by the unusually intense cold and flu season. Adjusted operating profits climbed six per cent to £2.6bn during the year.

It aims for its health and hygiene operations to comprise 72 per cent of its business by the end of 2015, and for emerging markets to form at least half of its business.

Reckitt is focusing on 19 ‘Powerbrands’, including products such as Cillit Bang cleaner, Dettol disinfectant, Vanish stain remover and Gaviscon indigestion treatment.

Geographically, it is focusing on 16 ‘Powermarkets’, many of which are emerging markets.

Reckitt ended 2012 with net debt of £2.4bn, up from £1.8bn after a series of acquisitions and dividend payouts totalling £916m.

Reckitt hiked its final dividend 11 per cent to 78p per share.